Premier ministers of Germany's 16 states met in the Chancellery in Berlin on Tuesday evening to discuss the planned reform of the Renewable Energy Act (EEG).
Speaking to reporters early on Wednesday morning, German Chancellor Angela Merkel said the talks had "come a long way."
Under the planned reforms, Berlin has agreed to limit the expansion of onshore wind at 2.8 gigawatts in capacity per year, which equates to around 1,000 wind turbines.
In a bid to avoid overburdening Germany's electricity grid, only a certain amount of new capacity will by allowed in the north.
Saxony-Anhalt Premier Reiner Haseloff spoke of a "breakthrough," while his counterpart in Bremen, Carsten Sieling, said they had covered 90 percent of the ground.
At the heart of the dispute was the scale and pace at which renewable energy sources were to be expanded over the next decade. By 2025, the federal government wants 40 to 45 percent of electricity to be provided by green power sources. The share currently stands around 30 percent. In addition, the federal government also wants to link the promotion of wind and solar energy, as demanded by the EU, in tenders.
Costs and shortages of power lines were also a contentious issue during negotiations, with each state prioritizing different interests. While solar energy and biomass is important for Bavaria in the south, for example, wind energy is more heavily relied upon in the north and other parts of Germany.
End of 'good intentions'
Ahead of the meeting on Tuesdsay evening, Volker Kauder, leader of the Christian Democrat faction in the Bundestag, Germany's lower house of parliament, called for a comprehensive reform of the promotion of renewable energy.
The "good intentions" of promoting wind farms are no longer relevant as they don't provide enough energy to the grid, Kauder said. Current customers already have to pay 25 billion euros ($27.8 billion) in support of green electricity as part of EEG reallocation charge.
"It must be clear: network expansion, connection, and power must be brought together," Kauder said, adding that power which isn't reaching the grid can no longer be paid for.
"The EEG has been created to finance and get renewable power off the ground - and not for the main part to operate structural policy or implement federalism interests," Kauder said.
Prior to the meeting on Tuesday, Merkel also called for the construction of more power lines to improve the transition to renewable energy.
"[This] will only happen when, in the end, power is sent through the lines to where it is needed," Merkel said.
With summer recess just weeks away, the German government is under growing pressure to finalize the reform package. Failing to do so could also affect the start date for the reform to be implemented. Berlin has already agreed upon January 1, 2017, with the EU Commission.